If fact I bet the cost to recover the bad debt exceeded amount of bad debt.
GSEs Need Better Plan to Recover Losses from Foreclosures: FHFA OIG
10/17/2012 By: Esther Cho
When a home is sold through a foreclosure sale, at times the debt on the mortgage is not fully recovered through the sale. The remaining amount is the deficiency, and this amount is passed on to the mortgage owner to absorb or to try and collect from the borrower.
The FHFA’s Office of Inspector General (OIG) revealed in a report Wednesday that Fannie Mae and Freddie Mac have a recovery rate of only 0.22 percent when pursuing deficiencies, leaving room for much improvement.
According to the report, in 2011, the GSEs’ vendors pursued 35,231 deficiency accounts, with a combined value of about $2.1 billion. Of this amount, vendors recouped about $4.7 million, which is 0.22 percent of the total.
In addition, 2012 may see even more losses to recover, considering there are 1.1 million seriously delinquent mortgages on the verge of becoming foreclosures, OIG reported. The figure is triple the number of GSE foreclosures in 2011.
In the report, OIG said “timely guidance” from FHFA on how the GSEs can manage deficiencies could help them recoup future losses and protect taxpayer dollars.
“Recovering losses from strategic defaulters and others who have the ability to repay their financial obligations-e.g., real estate investors and vacation home owners-presents an opportunity for the Enterprises to strengthen their financial positions and to reduce the need for future taxpayer support,” OIG stated in the report.
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Proprietary OC Housing News home purchase analysis
1100 WARDMAN Dr Brea, CA 92821
$749,800 …….. Asking Price
$530,500 ………. Purchase Price
6/29/2012 ………. Purchase Date
$219,300 ………. Gross Gain (Loss)
($42,440) ………… Commissions and Costs at 8%
============================================
$176,860 ………. Net Gain (Loss)
============================================
41.3% ………. Gross Percent Change
33.3% ………. Net Percent Change
108.4% ………… Annual Appreciation
Cost of Home Ownership
——————————————————————————
$749,800 …….. Asking Price
$149,960 ………… 20% Down Conventional
3.50% …………. Mortgage Interest Rate
30 ……………… Number of Years
$599,840 …….. Mortgage
$136,677 ………. Income Requirement
$2,694 ………… Monthly Mortgage Payment
$650 ………… Property Tax at 1.04%
$0 ………… Mello Roos & Special Taxes
$187 ………… Homeowners Insurance at 0.3%
$0 ………… Private Mortgage Insurance
$0 ………… Homeowners Association Fees
============================================
$3,531 ………. Monthly Cash Outlays
($420) ………. Tax Savings
($944) ………. Equity Hidden in Payment
$167 ………….. Lost Income to Down Payment
$207 ………….. Maintenance and Replacement Reserves
============================================
$2,541 ………. Monthly Cost of Ownership
Cash Acquisition Demands
——————————————————————————
$8,998 ………… Furnishing and Move In at 1% + $1,500
$8,998 ………… Closing Costs at 1% + $1,500
$5,998 ………… Interest Points
$149,960 ………… Down Payment
============================================
$173,954 ………. Total Cash Costs
$38,900 ………. Emergency Cash Reserves
============================================
$212,854 ………. Total Savings Needed
The property above is available for sale on the MLS.
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Cost of Ownership Analysis
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Nearby Foreclosures
Gain a competitive advantage over other buyers. By locating distressed properties -- before they hit the MLS -- you can discover where tomorrow's REOs and short sales will appear. Most of these properties are not listed on the MLS, but they will be soon. Research properties in advance and get a jump on your competition. Don't miss out on another deal because you couldn't act quickly. Use this tool to your advantage! The red properties are already bank owned. As soon as REO asset managers prepare them for sale, they will be on the MLS. Get ready! The green and blue properties have owners who are not paying their mortgages. They may be offered as short sales, or they may go through foreclosure and become REO. Either way, they will also likely be available on the MLS soon. Find your next home! Be prepared to offer on these properties by researching them in advance or risk losing out to buyers who are have done their homework. Start your research today! To find distressed properties, enter your desired location and press search. Scroll through list by pressing "next."Comparative Market Analysis
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Home Prices Forecast to Make Slow Progress from Floor Reached in Q1
Home prices reached a sustainable bottom during the first quarter of this year, according to Barclays’ U.S. residential credit strategy team. In many markets, longer-term affordability measures point to equilibrium, the firm’s analysts contend.
While the floor appears to have materialized, they stress that home prices are likely to recover slowly over the next 4 to 5 years.
“We expect on average a 3-4 percent annual increase in home prices [nationally] in coming years,” they said in an updated market outlook.
At that rate, Barclays’ analysts explained, home prices will be slightly below their 2006 peaks even in 2020, finally returning to pre-crisis peak levels in June 2021.
Barclays credits government and private modification programs with delaying foreclosures and preventing an overcorrection, allowing the home price floor to form earlier this year by keeping a glut of distressed homes from hitting the market.
The research firm noted that it is seeing significant variation by state in terms of home price appreciation, tied directly to foreclosure processing timelines.
States with the fastest timelines—California (7.0 months), Colorado (7.3 months), Arizona (7.7 months)—are also home to the biggest annual increases in home prices. Data provided in Barclays report illustrates that foreclosure timelines in these states are on average at least 12 months shorter than in states with the slowest procedures—New Jersey (21.3 months), New York (21.0 months), Florida (20.7 months)—where price gains are smaller.
Delayed foreclosures mean distressed inventory will remain elevated, according to Barclays. The firm’s analysts estimate there are currently close to 3.3 million homes seriously delinquent or in foreclosure which will eventually need to be sold as REOs or short sales. Over the next three years, they expect to see around 4 million liquidations.
“We expect 110,000 distressed sales per month for several years, which should keep [the] distressed share [of homes sales] elevated,” the analysts wrote. For each 1 percent lower distressed share, home prices improve 1.1 percent, according to Barclays.
The firm’s analysts noted in their report, however, that shadow inventory is not the same thing as excess supply, and stressed, “[W]e believe that in the longer term, housing is driven by excess supply.” In fact, Barclays’ data show that the industry’s shadow inventory has been declining steadily for more than a year, and the excess supply is manageable over a two- to three-year period.
“What matters is total excess supply, including owner and rental units,” the analysts wrote, adding that foreclosed borrowers still need a housing unit; they’re simply transitioning from owner to rental units. By Barclays’ assessment, excess supply stood at about 2.6 million housing units in June 2012.
“Our estimate for clearing excess supply is 2-3 years; but recent household formation has outpaced completions substantially, which could point to faster absorption of the excess supply,” Barclays’ analysts stated in their report.
With supply and demand aligning more closely, Barclays says long-run measures suggest home prices are close to equilibrium, and that means the risk that home prices landed on a false bottom earlier this year and will fall dramatically from their current levels remains low. “The government will intervene if prices fall further, [and] other factors will keep timelines long,” the research firm noted in its analysis.
Risks that could upset Barclays’ updated outlook for the housing and residential credit markets stem mostly from extra-market shocks, the company’s analysts explained. Such shocks could take the form of the fiscal cliff awaiting U.S. lawmakers at year-end, the reverberating effects of ongoing sovereign debt crises in Europe, and the fate of the mortgage interest deduction, though Barclays notes the risk that comes with capping the deduction is associated primarily with higher-priced homes.